Ladies and gentlemen, thank you for standing by, and welcome to the Second Quarter 2020 BlackLine Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Alex Geller, Vice President of IR. You may begin..

Good afternoon, and thank you for your participation today. With me on the call is Therese Tucker, Founder and Chief Executive Officer of BlackLine; Marc Huffman, President and Chief Operating Officer; and Mark Partin, Chief Financial Officer.

Before we get started, I would like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans, objectives and expected performance, in particular, our guidance for Q3 and the full year, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements represent our outlook only as of the date of this call.

While we believe any forward-looking statements we may make are reasonable, actual results could differ materially because the statements are based on our current expectations as of today and are subject to risks and uncertainties, including those stated in our periodic reports filed with the Securities and Exchange Commission in particular, our Form 10-K and Form 10-Q as well as risks related to the ongoing COVID-19 pandemic and the related responses by government and private industry, including macro and regional economic risks.

We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Also, unless otherwise stated, all financial measures disclosed on this call will be non-GAAP.

A discussion of why we use non-GAAP financial measures and information regarding reconciliations of our GAAP versus non-GAAP results is currently available in our press release, which may be found on our Investor Relations website at investors.blackline.com, or on our Form 8-K filed with the SEC today.

Now I will turn the call over to Therese to begin..

Good afternoon, everyone, and thank you for joining us today. As you know, the last several months have been unusual for companies and people everywhere. Given the challenges our customers and employees have been facing in this difficult environment, I was very pleased by our team's ability to stay focused, execute and drive performance in Q2.

We saw the demand environment improved throughout the quarter as companies around the world once again began to fund their mission-critical initiatives. We believe the demand for back-end finance automation will benefit BlackLine as a market leader during this difficult COVID environment.

As a result, BlackLine's performance in the quarter was better than expected. As the pandemic continues, it is becoming increasingly clear, there is a new normal for a distributed workforce.

These circumstances have exposed the limitations of traditional manual processes and put a spotlight on the back office, an area that has historically been overlooked and underinvested in.

This new environment is particularly challenging for accounting and finance professionals, who are now forced to manage manual and paper-based processes in a remote world. Legacy accounting processes weren't sustainable in a pre-COVID world, and this pandemic has made them even less so.

Last quarter, many accounting and finance professionals underwent their first ever remote close. At that time, I doubt many of them thought we would still be operating in a distributed workforce and even fewer considered the possibility that their year-end close would be remote as well.

Today, that outcome has become a likely reality, creating a sense of urgency for their technology initiatives. As priorities continue to shift and budgets contract, companies must figure out how to automate and transform.

We believe these challenges present an opportunity for finance leaders to move beyond legacy accounting processes and prepare their organizations for the future of work with changes that will outlast the pandemic. Marc Huffman will touch on this in more detail shortly.

BlackLine customers are considerably better prepared for a remote close than those companies that do not have BlackLine. We do know, however, that many of our customers in certain industries have been negatively impacted by the pandemic. To support our customers in these challenging times, our customer outreach continued throughout the second quarter.

These outreach efforts have been supported by nearly every department in BlackLine and span a variety of programs from education, training and development to coaching sessions with subject matter experts, relief programs and even some complementary products and services.

Our newest outreach effort, remote audit, is a solutions and services package composed of subject matter expertise and best practice processes. Aptly named, it focuses on the external auditor, an incredibly important role in the world of accounting.

Similar to the accounting and finance organization, auditors are traditionally on-site and heavily reliant on manual processes. Executing these processes off-site can significantly limit access to information and supporting documentation that is required for signoff.

Remote audit, which became available in May, improves the process of auditing the company's financials and give auditors the ability to verify and validate financials within the BlackLine platform. Many BlackLine customers already grant their auditors direct access, which has benefited them greatly in the sudden shift to remote work.

We offered this outreach package on a complementary basis to a number of customers to help those who have not yet taken advantage of this capability. I am proud that we are able to support and lead our customers through this pandemic, and I am encouraged by the uptick we have seen with these outreach efforts.

In addition to enabling companies to close their books in the distributed world, it is also driving goodwill and generating significant praise from our customers. Before I turn the call over to Mark, I wanted to talk about the other news we announced today. Effective January 1, I'll be transitioning the CEO role to Marc.

I'll remain involved as Executive Chair with the goal of helping Marc take BlackLine to the next level. This is part of a succession plan we've been working toward for some time, and I'm so pleased with all the work that Marc has done to help scale and grow our company since he joined BlackLine in 2018. He's fantastic.

This change will allow me in the executive chair role to focus on my passion, product and customers. I'm excited about BlackLine's future and look forward to this next phase. And now I'll turn it over to Mr. Huffman to discuss our recent business performance in more detail..

Thank you, Therese, and good afternoon, everyone. I am excited and humbled to assume the role of CEO at the start of the next year. One of the reasons that Therese and I have worked so well together is relying on the core values that make BlackLine so special.

I look forward to continuing to work with this experienced and talented management team to execute on our largely untapped market opportunity and growth strategy. As Therese mentioned, we were pleasantly surprised to see the demand environment improved throughout the quarter.

On the last call, I discussed how our biggest challenge from COVID was the impact of company budgets and the ability for customers and prospects to win budget amongst a long list of other mission-critical priorities.

I'm happy to say that despite a slow start in April, budgets began to free up with increasing momentum in May and June, resulting in better-than-expected performance for the quarter. If you recall, through 2019 and early Q1, our growth strategy benefited from strong demand, great sales execution and a growing partner ecosystem.

Following the outbreak of COVID, as you might expect, we did not achieve our original pre-COVID growth plan for Q2. The market we're in today has not yet returned to that level, but early indications give us confidence that financial back-end automation will remain a priority and possibly even accelerate when the economy begins to recover.

Since it's challenging to identify when that will happen and what success is in this current environment, I wanted to outline what went well in the quarter and how we are defining that success. At the top end of the market, we were pleasantly surprised that we were able to close large strategic transformation deals in the quarter.

Our initial view was that these types of deals would be on hold, as organizations were reticent to commit to long-term projects with significant resources and capital. We were pleased, however, to see positive movement in these deals with some closing in the quarter and others that are progressing nicely.

At the other end of the market, we were also pleased by our mid-market business, which delivered a record number of new logos, in part to our recently introduced modern accounting playbook, or MAP, offering.

This customer outreach effort was specifically designed for the mid-market and is resonating with mid-market CFOs because it's purpose-built around proven leading practices with a quick time to value and speedy implementation.

At the start of the pandemic, we focused our sales efforts first on our customer success, leveraging our partner ecosystem and our large and experienced account management and customer success teams. Their strong relationships, combined with BlackLine's leadership position helped us drive growth within our existing customer base in Q2.

SOLEX was another bright spot of the quarter with continued improvement in the number of SOLEX wins. It's clear that BlackLine has become increasingly relevant to SAP's sales team in this COVID pandemic.

This change is attributed to being included in SAP's COVID response to customers and more importantly delivering on our reputation as the subject matter expert in financial close.

SAP account execs have successfully been able to use our position and messaging around the remote close to create value for their customers and generate sales opportunities.

As a result, our value proposition is getting more attention across a wider SAP audience, driving greater alignment across our target accounts globally and resulting in more joint enablement engagements.

What's even more exciting is that although remote close is opening the door to many of these SOLEX opportunities, our reps have found that SAP prospects are equally interested in the path to S/4HANA and the closed benefits around automation, visibility and control that BlackLine provides.

We delivered stronger-than-expected services revenue with our services team working closely with our customer base to execute while working remotely, resulting in minimal disruption to implementation project.

In addition to continued progress on existing projects, many customers launched new implementations to accelerate the time to value from their ongoing finance transformations. And of course, there are the intangibles. These are harder to measure, but areas where we have gained strength.

This includes our competitive positioning, where we saw strong win rates, customer relationships and goodwill, as evidenced by a 97% renewal rate and positive customer feedback and uptake on our customer outreach programs.

We view these successes as early indicators that the market is moving in the right direction with plans for accelerated digital transformation. Now I wanted to share some examples of how we're driving success for our customers. We closed a large digital transformation deal with one of the world's largest organizations.

This company had been challenged from an accounting perspective with 23 ERP systems, multiple homegrown systems, autonomous subsidiaries and massive data volumes. This was a highly competitive deal against their incumbent ERP vendor, a point solution provider and us.

Both competitors tried to compete on price, but the company chose BlackLine due to our proven track record and ability to deliver. In June, this customer purchased our finance transformation solution, transaction matching and compliance. This deal had been in the works since the spring of 2019.

But since COVID hit, we feared this deal would be significantly devoid. The fact that this deal closed in the midst of the pandemic was great validation of our value proposition, the business case and our team's efforts. Among our existing customers, a large aviation company has been a BlackLine customer since 2008.

They were only using account reconciliation and also had two subsidiaries with separate BlackLine instances. In early 2019, they decided to embark on a multiyear strategic transformation with BlackLine to consolidate and optimize their entire record-to-report process and eliminate efficiencies within their complex intercompany transactions.

As we all know, the aviation industry has been hit particularly hard by the pandemic, and this customer was no exception. They had to navigate tough decisions and financial hardships and push the pause button on every single finance project they had. We had every reason to believe their journey with BlackLine would be delayed as well.

Their executive team realized the strategic value of BlackLine and helping them navigate through this challenging time. And in Q2, they added more users and purchased Intercompany Hub, Transaction Matching, journals, Variance and Compliance.

Once all of the optimizations and additional capabilities are enabled, it is estimated that this company could save millions of dollars per year. Moving down market, a regional bank went from introduction to close in a short 19 days. They had a very manual close using Excel with almost no visibility into their month end close processes.

Highly motivated by the challenges of a remote workforce, they purchased our modern accounting playbook in June to provide visibility and automation. This company's growth strategy was heavily dependent on M&A.

In addition to solving for their near-term challenges, they chose BlackLine as their strategic partner for the long-term as they continue to grow. From a go-to-market perspective, our sales and marketing teams continue to focus on building pipeline and closing deals. Not much has really changed on that front outside of the virtual sales motion.

We continue to tweak our go-to-market efforts to optimize this motion and align our messaging with the most pressing matter at hand, the remote close. As a result, our marketing team has been very busy, ensuring that we deliver on our reputation as the thought leader in remote close.

We continue to successfully shift our live customer conferences to virtual events in the quarter. We combined our InTheBlack Sydney and Singapore events into a virtual finance transformation series for APAC with specific tracks for prospects, customers and SOLEX. The event was a huge success with 900 attendees and already resulted in some Q2 wins.

One of the immediate benefits of digital marketing efforts is the ability to reach a broader audience. We've been able to more than double our marketing touch points in the quarter with record attendance at webinars and other virtual events.

While we're pleased by this degree of engagement and awareness, it's too early and we don't have enough data points to determine a consistent trend for how new pipeline generated through virtual sales and marketing will convert into sales.

We're seeing a similar benefit from our customer success teams, who have been very effective at engaging with a large number of customer accounts to the digital one-to-many events. As a result, our customer success teams remain busier than ever and continue to be a huge differentiator for us.

Our customer support teams have been more responsive and flexible to accommodate customers impacted by COVID. Our customers' success and accounting innovation teams with the help of our outreach programs continue to lead our customers to get deployed and realize full utilization from their BlackLine solutions.

All of these teams are aligning to focus on quick, relevant offers and activities targeted at specific tactical challenges. Our customer base is very receptive to this, and we believe this will continue to drive expansion and adoption within our customer base in the future.

Moving forward, it's difficult to predict what will happen with the macro economy for the remainder of the year and how that will impact demand. We believe some of the challenges we saw in Q2 will carry forward into the rest of the year.

International deals are lagging those in North America, companies in impacted industries continue to delay projects and many deals require additional qualifications around process and signoff.

With that said, BlackLine is focusing on helping our customers succeed, and we firmly believe that we will be the beneficiary of accelerated digital transformation spend once we emerge from this pandemic. And with that, I'll turn the call over to Mark Partin..

services revenue came in above our expectations at $5.4 million or 6% of total revenue. This represents 50% growth year-over-year and is greater than our previous guidance of $3 million to $4 million. Our international business represented 25% of total revenue in Q2, up from 23% in the prior year.

Despite this increase, the pace of growth slowed with the onset of the pandemic. Throughout Q2, international demand was not as strong as North America. Revenue from our SAP partnership was 24% of total revenue in Q2, in line with the prior year. Almost 90% of our large deals in the quarter included a partner.

Strategic products represented 23% of sales for the quarter and higher than our anticipated range of 15% to 20%. In Q2, our renewal rate remained steady at 97%. As we had predicted, our dollar-based net revenue retention rate came down slightly from 110% to 108%.

And we added 82 net new customers in the quarter, bringing our total customer count to 3,138. We remain committed to our long-term initiatives with continued investment in BlackLine's future.

Following a record hiring quarter in Q1, we had another strong hiring quarter in Q2, with the addition of global leadership across key areas of the organization, including senior leaders and strategy, alliances, go-to-market, product and technology.

In Q2, we realized cost savings in the quarter, predominantly due to the mandatory work-of-home regulations, including lower T&E, rent, facility-related cost and virtual marketing. Combined with higher-than-expected revenue, we generated net income attributable to BlackLine of $11.9 million.

We generated $9.6 million in operating cash flow and $3.5 million in free cash flow for the quarter. We finished the quarter with approximately $626 million in cash, cash equivalents and marketable securities.

Before I move to our outlook, I wanted to provide an update on our customer relief program that provides financial relief to customers impacted by the pandemic.

To date, the total number of customers seeking relief represent a very small percent of our base, with the majority of those requests coming from customers in hospitality and transportation and, to a lesser extent, energy, retail and apparel.

In Q2, this negatively impacted calculated billings by approximately 4% on a year-over-year basis, which is better than we anticipated. We will continue to offer this relief program in Q3, which will impact free cash flow and other key metrics, such as revenue and calculated billings.

With that said, based on the customer reaction to this relief program, we are incrementally more positive on our churn and attrition risk throughout this pandemic.

Despite the improving demand environment and better-than-expected sales execution in Q2, we expect COVID will continue to weigh on the demand and risk environment for the remainder of the year and impact billings growth.

Our assumptions remain pragmatic for Q3 and the second half and are based on continued macro uncertainty for our customers and prospects and low visibility on the continued pace of demand growth. Turning now to guidance for the third quarter of 2020. Total GAAP revenue is expected to be in the range of $84.5 million to $85.5 million.

On the bottom line, we expect to report net income attributable to BlackLine in the range of $6.5 million to $7.5 million or $0.11 to $0.12 on a per share basis. Our share count will be approximately 61.5 million diluted weighted average shares.

For the full year 2020, total GAAP revenue is expected to be in the range of $335.5 million to $338.5 million. And on the bottom line, we expect to report net income attributable to BlackLine in the range of $27.5 million to $29.5 million or $0.45 to $0.49 on a per share basis.

Our share count will be approximately 60.8 million diluted weighted average shares. And now we will take your questions..

Thank you. [Operator Instructions] And our first question comes from Koji Ikeda with Oppenheimer. Your line is open..

Great. Thank you for taking my questions. Therese, congratulations on your news. And congratulations to Marc Huffman on his promotion as CEO. Therese, I think we may have you for at least one more earnings call. So I'm not going to say any goodbyes just yet.

I do have a question on the net new customer adds, the 82 number, really great number there in a tough selling environment. So congratulations on the sales execution there.

And thinking about those strong adds and then balancing it against the billings in the quarter, how should we really be thinking about that delta there? Is it because the deals were more back-end loaded following that slow April? Were the deals mostly coming from smaller mid-market customers? Were there any enterprise customers out there that are starting at a much smaller contract value now during the pandemic or starting with shorter contract durations? And then I just have one follow-up..

Yes, great. I think you hit it on the nail on the head with this was a record quarter for mid-market. Mid-market deals tend to be smaller. Our average enterprise deal is in the six figures and mid-market is in five figures. So that's in large measure, the reason for it.

So yes, we were very pleased with the number of the – and the quality of the logos, but the vast majority of them were in the mid-market..

Great. And then my follow-up question is for you, Mr. Partin. Okay, I just want to be absolutely clear here on the customer release to the billings calculation, you said it was a 4% negative effect.

Is that 4 point of growth negative effect? Or is that 4% absolute negative effect to calculated billings?.

Of course. Thanks, Koji. Yes, it would have been 14% year-over-year, notwithstanding that billings release. And the billings release came in the form of delayed billings and reduced billings. So that's the impact..

Got it. Thank you..

Thank you..

Thank you, Our next question comes from Rob Oliver with Robert W. Baird. Your line is open..

Great. Thanks very much for taking my question. I'll just also echo my congratulations to both you, Therese and to Marc, and look forward to speaking with both of you. Just a couple of questions. Just so on the dollar-based net revenue retention number, it was kind of at the lower end of the range.

I know, as expected, just curious, it seems the linearity in the quarter was more back-end loaded as Koji, I think, asked about. But it also seems like you guys were doing a lot more work with existing customers.

So with cross-sell and upsell being a kind of natural move in a COVID environment, just curious if there was any pressure or what some of the dynamics were on that number? And then I just had a follow-up..

Yes, of course. Look, that was within our expectation, primarily given the demand environment. We were pleased with what we saw, but it hadn't returned to normal. And not just in the new logos, but in our existing customer base. So we also saw, though, a slight impact from the risk side.

We did have slightly higher attrition and churn within our range of expectations, but that also weighed on that number..

Okay. And then my follow-up was just too juicy of a pitch not to swing it, but the large customer win in the quarter, obviously, very exciting. Racking my brain here, even having been around a while to name 23 ERP systems. So it seems like a very large meaningful win in a real sweet spot for BlackLine.

Any other color you could provide on the land there? Which products were taken? I know you mentioned the sales process and competing on price makes sense. So congrats on that. I would appreciate any other color..

Sure. And thank you for congratulations to both the Therese and I, Rob. Appreciate it. So we have a – as you might expect, when you're in the face of pandemic, you expect some of these things to sort of pause. And we had previously had that expectation as well. Companies reassessed, like this one example.

And I would say they're a larger, more well-positioned global company with a very complex environment as our prepared remarks state.

And they looked across that and their positioning and said, "Hey, we continue to want to invest in something that's this strategic, especially during this difficult time when it sort of makes you aware of how fragile environments can be when you have a distributed workforce." And so I would say that there was a pause. Companies reassessed.

Those that were really strong companies and had big strategic plans executed on those. We saw a couple of those in the quarter, and we see a couple of those in our current pipeline moving along as well..

Thanks Marc. Thanks guys..

Thank you..

Thank you..

Our next question comes from Matt Stotler with William Blair. Your line is open..

Hey, guys. Congrats on results. Thanks for taking my questions. Therese, congrats on the announcement. And Marc, congratulations as well. Congratulations all around..

Thanks Matt..

Thank you..

So I guess the first question, I thought, it was interesting that you guys mentioned, obviously, the customer adopting ICH and Transaction Matching in the quarter and strategic products as a whole, kind of remaining above that expected range as they have for a few quarters now.

Figured in this tough environment, that would be one area maybe where you might see some weakness just given the size of those deals, especially the ICH and the complexity there. I would love to get just an update as you move through Q2 on kind of demand there and any progress with strategic products in terms of interest or deal flow in the quarter..

Sure. Matt, thank you. It's a great question.

And I think it speaks to some of the investments that we have been making in the past – the recent history, specifically investments in customer success and then some process expertise, our accounting innovation team, combined with building what I'm really proud of in the sales organization that really high-performance account management function.

And so we think of our strategic products are the things that drive the most value and the most automation and just really dramatically change a customer's environment.

And when you're able to bring together the great technology, the great process expertise, our experience of 3,100 companies that do business on BlackLine with account management, I think it's part of the reason why we continue to see strong performance in that area..

Got it. That's helpful. And then just one more. It was great to hear the progress at SAP. Obviously, you guys have been financial close companies, something that they've been increasingly prioritizing in this environment.

We'd love to get an update on what you're seeing outside of SAP and the rest of your partner channel progress there, especially kind of looking at the big four and your accounting firm partners?.

Yes. It's been really interesting, Matt, because we've seen sort of – our partners are positioning a quick start to things like tasks and reporting. And they've really come alongside our customer relief program to help our customers sort of get their remote closes in a place that's actually manageable.

And so they're working on that same sort of nimbleness that our customers need right now. And I really love what I see out of them because they've been oriented towards serving our customers. We've had some great projects with them this last quarter..

Got it. Thank you for having my questions..

Thank you. Our next question comes from Alex Sklar with Raymond James. Your line is open..

Great. Thank you. Mark, pardon, I wanted to ask about the second half – the implied second half guidance, basically looks like that you'd exit the fourth quarter with kind of a high single-digit growth rate, which is basically in line with your net retention.

Given the billings so far in the first half of the year and the renewal rate you addressed, that continues to be really healthy.

I was just wondering if you could help us walk through the puts and takes there?.

Yes, of course. Look, we are happy to reinstitute our guidance. We've given incrementally more visibility in the full year and felt we could do that. However, we still have a very pragmatic approach to it consistently with what we've always done. And the demand environment is going to be driven by the macro economy for most of the customers.

So we've taken a pragmatic approach for the demand for the remainder of the year, particularly given that Q3 has a tendency over the last several years to be seasonal for us. Q4 last year was one of the strongest quarters on record and creates a bit of a tough comparable.

So that's really – as we've factored into our guidance, what we're looking at for the remainder of the year..

Okay. Great. And then just another question on the partner channel. I think you said partners were involved in 90% of large deals, that's a little bit higher than the, I think, 70% plus, I remember historically.

Has anything changed there in terms of kind of the relationships there with your partners? Or what drove that higher success?.

Alex, just a real strong focus. Those larger deals obviously are more transformative, have a lot more process change requirements.

And the distribution organization as a whole and that would be our customer team as well as our sales team have a real heightened focused on making sure we have the right set of resources, including our partners involved in those larger, more transformative opportunities. So I think it reflects just good partnership skills and a focus by our team..

Great. Thank you. And I also will echo my congratulations to you and Therese..

Thanks..

Thank you. See, we even talk at the same time..

[Operator Instructions] Our next question comes from Josh Beck with KeyBanc. Your line is open..

Congrats team on the new roles. I wanted to ask just a bit about sales efficiency. It's one of those metrics that's really difficult to see what's happening with COVID and everything. But it sounded like within the mid-market, you had some really good momentum and what you have done with MAP resonated really well.

So if you look just in the mid-market segment, I'm just curious if you actually see maybe an improvement or maybe a new tactic that you would want to keep in kind of the post-COVID world..

Yes. So I'll talk about sort of the observations of the business. And if there's any financial metric, then I'll let Mark sort of jump in. But – so we did have a record number of new customer wins in the mid-market. And if you recall, we were concerned about that specific segment, perhaps having difficulties in the face of COVID and in the economy.

We accelerated some of our plans around our modern accounting playbook, which we've talked about being this proven method based on our 3,100 clients experiences to get people up. So we're focused on quicker time utility, which I think a lot of people are recognizing is valued in this particular economy and market space, and we focused on efficiency.

And what we've developed and started to deliver there, our sales team has really become proficient at positioning in collaboration with our services organization. And it's really resonated with mid-market CFOs. And so we're really pleased with it..

Okay. Great. I also wanted to ask, sounds like there was some nice upside on the strategic products versus plan. Were there certain ones that stood out? Were there may be certain cohorts where maybe the adoption was better? Just any color you can share there..

Yes. Look, the Transaction Matching and ICH were both very strong in the quarter and Transaction Matching has been trending very positively at both the high end and low end of the market and in existing customers and new customers. It is a great tool for so many of our customers to drive value and efficiency in their software.

So for us, it was really just a very robust around those two sales for the quarter..

Okay. Great. And if I could just squeeze one last one, and I'm not sure if you can comment on it, but it sounded like things progressed positively throughout the quarter.

Is July looking a lot like June or is July maybe better or worse? Any other color you can share there?.

Yes. What we did see, you're right, is that we saw an improving trend in the quarter in Q2. So we finished up the quarter very strong, and we're pleased with that. It's still too early to take that experience and that limited data set and apply it to our guidance in Q3 and Q4. So we haven't done that.

And instead, what we're doing is being very pragmatic about what we think might be a continued COVID overhang on the demand side and on the risk side. So we've factored that into our guide..

Makes total sense. Thank you everyone. Appreciate it..

Thank you..

And our last question comes from Mark Murphy with JPMorgan. Your line is open..

Hey, good afternoon. This is Matt Coss on behalf of Mark Murphy. Thanks for taking my questions. And again, congrats to Therese and Marc on the new roles. A quick question for Mark Partin.

Was there a change in contract duration? And also, as we think about paid user adds, I know in the past, you've said they're less critical for your growth, given an improvement or increase in the sale of strategic products.

Any change in the thinking on paid user adds?.

Yes, got it. Our average contract length remains consistent at about 23 months. And on the user adds, it is one proxy for growth. It's one measure. When we sell strategic products and have a strong quarter like we did in Q2, those don't add users.

So we pay attention to it, and we report it because it's key to the expansion within our core platform and we did see good sales in Q2. But if you go back over the last two to three or four quarters, this number can vary on a quarterly basis. And we've been pleased with the last sort of six to nine months.

It's tough to look at Q2 on a standalone, given the demand environment..

Got it. That's helpful. And then one for you, Therese.

Since next year, you'll be getting more into full-time product development and customer focus, what do you think your areas of focus will be on the product side? And is there anything out there from an M&A standpoint that potentially looks attractive, if you were to – not exactly what you're going to buy, but if you're going to think of buying a technology, what sort of that technology might that be?.

Well, Matt, we serve the controller and the office of the CFO. And so that is always going to be our focus, whether we build or buy and is how do we best serve the customer base that we have and our future customers that work in this industry.

I actually think a big part of my role going forward is not just sort of what's available now, but also how can technology change the entire industry of accounting and finance, right? How can you actually use some of the newer tools that are coming out? How can you shift so the pain that companies are feeling today from their trying to do a remote audit for the first time, that and so much more can be automated for them.

It's pretty exciting to think about what the future can hold. And so I actually get to work on that, and that's pretty cool..

Thank you very much..

Thank you..

Thanks Matt..

And there are no further questions in the queue. I'd like to turn it back to Therese Tucker, Founder and CEO, for closing remarks..

Thank you, everyone, for joining us today. Please stay safe and stay well. Thank you..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day..